COMPANY SPOTLIGHT: BLEECKER PARTNERS

Describe your investment thesis:

We acquire shallow bay industrial warehouses, buildings that tend to be smaller than 125k SF and multi-tenanted into suites ranging from 5k – 25k square feet, located directly adjacent to highly populated neighborhoods where people live, work and socialize because (i) our building locations are mission critical for our tenants to deliver goods and services quick enough to match consumers’ modern expectations, (ii) the supply and demand fundamentals are extremely favorable given significant population growth in D/FW drives tenant health and new tenants entering the market, while supply is cost burdened and land availability for desirable locations is nearly non-existent, and (iii) ownership is fragmented enough to allow us to buy at significant discounts to replacement cost and yield premiums to typical industrial investors and public REITs focused on bulk distribution warehouses.

When did you buy your first deal?

We closed our first deal on Memorial Day Weekend 2022. It was a 34,528-square-foot multi-tenant shallow bay industrial building in Dallas that was passively managed. During our diligence period, it was immediately evident that the supply-demand imbalance existed in the submarket given occupancy for similar sized suites was and continues to be nearly 100%. Since acquiring the property, we have seen tenants’ demands for improved warehouse conditions be happily met with elevated rents. Upgrades included high bay LED lights, gated parking, and fully renovated office pods. We achieved rental rates 40%+ above our underwritten rental rates because of these two dynamics.

What was the deal dynamic?

The seller, originally the property developer, lived two hours away from the property, and he was tired of managing it himself. He took a meeting with us, named a price that we had to pay, and we agreed to the deal on site. The quickest transaction that I’ve ever been a part of - straight to the point and no nonsense.

How did you capitalize the opportunity in a rising interest rate environment?

At the time, the Federal Reserve was in the midst of its rate hike cycle. Given our respective backgrounds, we ran our own financing process, and we secured five-year fixed rate debt at the-then WSJ Prime Rate from a $1B bank based in Oklahoma. Given our respective backgrounds, we interviewed several different prospective lenders and selected the bank who was most familiar with this asset type.

What drew you to this submarket?

We thought the Northeast Dallas/Garland submarket was underappreciated from an investor perspective; however, we liked it because of its location, adjacent to Interstate 635, a major thoroughfare in D/FW undergoing an expansion from eight to 16 lanes and its proximity to a significant population. Within a ten-mile radius, the population is greater than one million people which ties directly to our thesis that goods and services providers will need a location proximate to such a large population.

If you have already executed the business plan and created value, how do you analyze whether to hold or sell?

In today’s uncertain economic moment, with low-leverage and a fixed interest rate, the need to sell today isn’t forced. We have executed our business plan and are generating high-teens cash-on-cash returns for our investors, which is clearly favorable vs. alternative investment opportunities. We are constantly exploring our options for a disposition, a refinancing, or a recapitalization - whichever results in the best outcome for our investors. Our analysis is institutional and takes into account the go-forward return profile of any capital event vs. the alternative of holding as-is.

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